monthly brst communique brstbrstbrs ... the value of asking “aur dikhao”. and i am sure you have...
TRANSCRIPT
BRSTBRSTBRSTB
BRST
RSTBRST
BRSTBRSTBRSTBR
BRST
BRSTBRSBRSTBRS
ST
BRBRSTBRSTBRSTBRST
STBRSTJuly 2015
1Portfolio Management Services | Regn No. PMS INP 000000670
CommuniqueMONTHLY
CommuniqueMONTHLY
Dear Investors and My Dear Advisor Friends,
As you might have seen in various media reports, Indian investors' allocation into equity markets over the last
year or so has been higher than cumulative investment over the last 12 years. For the first time in my experience,
I have seen research reports stating that in June 2015, FII outflows were USD 981 mn but the markets held
steady because FII outflow was
more than counter balanced by
domestic inflows from Mutual
Funds and Insurance Companies to
the tune of USD 1.88 bn of which
USD 1.4 bn was from Mutual Funds
alone. (Source: Deutsche Bank India
Equity Strategy dated July 3, 2015)
Last 12 months equity inflows of s at $15bn are equal to the cumulative
s equity inflows of the previous 10 years
MF
MF
Cumulative MF inflows in equity during Sep’04-Jun’14 = Rs. 950bn
(the same amount s received in last 12 months)MF150
100
50
0
-100
-50
Jun
/04
De
c/0
4
Jun
/05
De
c/0
5
Jun
/06
De
c/0
6
Jun
/07
De
c/0
7
Jun
/08
De
c/0
8
Jun
/09
De
c/0
9
Jun
/10
De
c/1
0
Jun
/11
De
c/1
1
Jun
/12
De
c/1
2
Jun
/13
De
c/1
3
Jun
/14
De
c/1
4
Jun
/15
Net equity flows in s (Rs. bn)MF
Rs. 950
bn
Source:AMFI
In the past, I have expressed concerns that Indians don't own enough
of India and its growth because bulk of Indian companies is owned by
promoters and foreigners. I hope this trend continues and I would
hazard a few reasons below as to why I believe this trend will indeed
continue for some time to come:
1. From a long term trend perspective, it is worth understanding
that habits change with generations. Till late 90s and early
2000s, the Indian markets had a very high level of fixed income rates. RBI used to issue GoI Relief Bonds at 12% in late 90s and the rates started
to decline only in mid 2000s. Just imagine, GoI issuing bonds at 12% risk free and tax free and that's not too far back. Till recently most
favoured public sectors banks like the SBI used to pay between 9 and 11% on their fixed deposits. With this kind of rate structure running till
very recently, it is worth noting we have huge populace of moneyed investors who are just about getting accustomed to a variable rate market
linked environment while they have seen 10-12% being generated risk free not too far back It is now that we are all likely to get used to the
idea that “there is no return without risk” (source: Reserve Bank of India)
2. Off late there are abundant indications that other competing asset classes like Gold, Equities and Commodities are not showing any price
movement. Real estate prices are stagnating or showing
marginal downtrend while gold prices have been correcting over
the last couple of years. This trend can be seen in the chart below
which shows that demand for gold as reflected in gold imports
has fallen 50% over two years. Equity as an asset class is showing
up favourably on all comparison charts which was not the case
until recently.
3. Lower interest rates are here to stay and we don't envisage
sovereign linked products to give high returns in the near future.
Recent decision of EPFO to start allocating funds to equities is
ample testimony to this trend.
4. Cyclically, India is moving from a period of economic slowdown
into a period with better growth prospects and for some time to
come equity may show good returns which will encourage more
equity flows on the back of good returns on past investments.
Figure 14: Net gold import has fallen considerably from its peak in FY12
(US$ bn) Net Gold Imports
50
40
30
20
10
0
FY
00
FY
01
FY
02
FY
03
FY
04
FY
05
FY
06
FY
07
FY
08
FY
09
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
3 2 2 31
7
5 56
11
17
37
45
36
16
21
Source: RBI, IIFL Research
(Continued overleaf)
The moot question is that with so much money being allocated and more likely to be allocated to equity what process of investing does the
investor follow? I have very few opportunities to meet investors but I do meet distributors and advisors on daily basis. The first process to be
followed is to identify the right intermediary to guide you in the process of investing and in selecting the right funds. The intermediary will be
crucial to ensuring that you identify the right funds and for right reasons. Talking of reasons, the most significant trend that I have picked up from
BRSTBRSTBRSTBRSTBRST
BRSTBR
BRST
BRSTBRSBRSTBRS
ST
BRBRSTBRST
STBRST
2Portfolio Management Services | Regn No. PMS INP 000000670
Buy Right Stock Characteristics
‘Q’uality
‘G’rowth
‘L’ongevity
‘P’rice
denotes quality of the business and
management
denotes growth in earnings and sustained RoE
denotes longevity of the competitive
advantage or economic moat of the business
denotes our approach of buying a good business
for a fair price rather than buying a fair business for a
good price
QGLP
Sit Tight Approach
Buy and Hold:
Focus:
We are strictly buy and hold investors and
believe that picking the right business needs skill and
holding onto these businesses to enable our investors to
benefit from the entire growth cycle needs even more
skill.
Our portfolios are high conviction portfolios with
20 to 25 stocks being our ideal number. We believe in
adequate diversification but over-diversification results
in diluting returns for our investors and adding market
risk
intermediaries is high returns over the recent most 1 year and 3 years periods. This is intuitively how we buy any product based on its track
record or past performance. Mutual Funds have a few more nuances than just checking past performance. It is widely publicized that “Past
performance is not an indicator of future” – which means one may still buy a fund with good past performance but one must never extrapolate it
into the future or assume that similar performance will be repeated in future. So how does one figure out whether past performance is likely to
be repeated or sustained?
Its an interesting trend nowadays whereby we are teaching consumers what's the right question to ask. I recently saw an online retailer teaching
consumers the value of asking “aur dikhao”. And I am sure you have seen India's highest selling four wheeler nudging consumers to ask “kitna
degi”. So what's the right question to ask when someone shows you or talks to you about performance of mutual funds and you are wondering,
well, this is past, I am impressed but will this be repeated in future? The question to ask when someone shows past performance is “kaise aaya?”
If the performance being shown to you is an outcome of some process being followed then one knows that yes it can be sustained or there is
likelihood of getting same outputs. What's the definition of the word process? Businessdictionary.com says process is defined as “sequence of
interdependent and linked procedures which, at every stage, consume one or more resources (employee time, energy, machines, money) to
convert inputs (data, material, parts, etc.) into outputs.” It means that for same output to be generated, the same inputs need to be provided in
the same sequence of interdependent or linked procedures.
At Motilal Oswal AMC, we have always believed that performance is an output or an end product and considering we are operating in equity
markets, the output cannot be controlled. What we can control is the quality of inputs and meticulous following of the same set of
interdependent procedures for the inputs to be provided.
This is manifested in the chart below. We believe in buying right (Q-G-L-P companies) and sitting tight (concentrated portfolios; buy and hold).
Read more about this at:
and
So the next time you discuss performance please ask “kaisa aaya”? The question is important and more importantly you need someone to
answer it for you – and that's where your advisor has a big role to play.
Happy Investing,
Managing Director & CEO
Aashish P Somaiyaa
www.motilaloswalmf.com/knowledge-centre/buy-right-sit-tight www.motilaloswalmf.com/knowledge-centre/qglp
BRSTBRSTBRSTBRSTBRST
BRSTBR
BRST
BRSTBRSBRSTBRS
ST
BRBRSTBRST
STBRST
Value Strategy
The Strategy aims to benefit from the long term
compounding effect on investments done in good
businesses, run by great business managers for
superior wealth creation.
Strategy Objective
3Portfolio Management Services | Regn No. PMS INP 000000670
Investment Strategy
• Value based stock selection
• Investment Approach: Buy & Hold
• Investments with Long term perspective
• Maximize post tax return due to Low Churn
Details
Fund Manager : Manish Sonthalia
Strategy Type : Open ended
Date of Inception : 24th March 2003
Benchmark : CNX Nifty
Investment Horizon : 3 Years +
Subscription : Daily
Redemption : Daily
Valuation Point : Daily
The Above strategy returns are of a Model Client. Returns of individual clients may differ depending on factors such as time of entry/exit/ additional inflows in the strategy. The Above returns are
calculated on NAV basis and are based on the closing market prices as on . Past performance may or may not be sustained in future. Returns above 1 year are annualized. Please refer to
the disclosure document for further information.
30th June 2015
Top Sectors
Sector Allocation % Allocation*
*Above 5% & Cash
Auto & Auto Ancillaries
Banking & Finance
Pharmaceuticals
Infotech
Engineering & Electricals
FMCG
Alcoholic Beverages and Distilleries
Cash
36.02
24.06
10.80
6.26
5.88
5.49
5.22
6.27
Data as on 30th June 2015
Top Holdings
Particulars % Allocation*
*Above 5%
Eicher Motors Ltd.
Sun Pharmaceuticals Ltd.
HDFC Bank Ltd.
Bosch Ltd.
Housing Development Finance Corporation Ltd.
State Bank of India
Tata Consultancy Services Ltd.
Larsen & Toubro Ltd.
Asian Paints Ltd.
United Spirits Ltd.
18.23
10.80
9.68
8.98
7.94
6.44
6.26
5.88
5.49
5.22
Data as on 30th June 2015
Key Portfolio Analysis
Standard Deviation (%)
Beta
24.06
1.00
Performance Data CNX NiftyValue Strategy
21.51
0.81
Data as on 30th June 2015
Value Strategy CNX Nifty All Figures in %
Period
% o
f re
turn
s
Data as on 30th June 2015
32.34
34.69
22.64
16.6 15.61
19.72
28.06
9.95
19.68
16.6
10.439.51
14.19
18.79
0
5
10
15
20
25
30
35
40
1 Year 2 Year 3 Year 4 Year 5 Year 10 Year Since Inception*
BRSTBRSTBRSTBRSTBRST
BRSTBR
BRST
BRSTBRSBRSTBRS
ST
BRBRSTBRST
STBRST
Next Trillion Dollar Opportunity Strategy
4Portfolio Management Services | Regn No. PMS INP 000000670
Investment Strategy
• Stocks with Reasonable Valuation
• Concentration on Emerging Themes
• Buy & Hold Strategy
Details
Fund Manager : Manish Sonthalia
Strategy Type : Open ended
Date of Inception : 11th Dec. 2007
Benchmark : CNX Midcap
Investment Horizon : 3 Years +
Subscription : Daily
Redemption : Daily
Valuation Point : Daily
Strategy Objective
The strategy aims to deliver superior returns by
investing in focused themes which are part of the
next Trillion Dollar GDP growth opportunity. It
aims to predominantly invest in Small & Mid Cap
stocks with a focus on Identifying Emerging
Stocks/Sectors.
Top Sectors
Banking & Finance
Auto & Auto Ancillaries
FMCG
Oil and Gas
Diversified
Engineering & Electricals
Cash
28.34
24.46
18.83
9.49
6.41
5.26
0.69
Sector Allocation % Allocation*
*Above 5% & CashData as on 30th June 2015
Top Holdings
Eicher Motors Ltd.
Bajaj Finance Ltd.
Page Industries Ltd.
Hindustan Petroleum Corporation Ltd.
Bosch Ltd.
Voltas Ltd.
Max India Ltd.
Particulars % Allocation*
17.14
10.49
9.57
9.49
7.32
6.41
5.04
*Above 5%Data as on 30th June 2015
Key Portfolio Analysis
Standard Deviation (%)
Beta
23.02
1.00
Performance Data CNX MidcapNTDOP
18.27
0.69
Data as on 30th June 2015
Period
% o
f re
turn
s
NTDOP Strategy CNX Midcap All Figures in %
Data as on 30th June 2015
The Above strategy returns are of a Model Client. Returns of individual clients may differ depending on factors such as time of entry/exit/ additional inflows in the strategy. The Above returns are
calculated on NAV basis and are based on the closing market prices as on . Past performance may or may not be sustained in future. Returns above 1 year are annualized. Please refer to
the disclosure document for further information.
30th June 2015
68.97
55.88
45.49
35.46
29.97
19.7817.24
33.11
20.96
12.839.86
5.84
0
10
20
30
40
50
60
70
80
1 Year 2 Year 3 Year 4 Year 5 Year Since Inception *
BRSTBRSTBRSTBRSTBRST
BRSTBR
BRST
BRSTBRSBRSTBRS
ST
BRBRSTBRST
STBRST
10Portfolio Management Services | Regn No. PMS INP 000000670
All opinions, figures, charts/graphs, estimates and data included in this document are as on date and are subject to change without notice. While utmost
care has been exercised while preparing this document, Motilal Oswal Asset Management Company Limited does not warrant the completeness or
accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. No part of this document may be
duplicated in whole or in part in any form and/or redistributed without prior written consent of the Motilal Oswal Asset Management Company Limited.
Readers should before investing in the Strategy make their own investigation and seek appropriate professional advice. Investments in Securities are
subject to market and other risks and there is no assurance or guarantee that the objectives of any of the strategies of the Portfolio Management Services
will be achieved. Clients under Portfolio Management Services are not being offered any guaranteed/assured returns. Past performance of the Portfolio
Manager does not indicate the future performance of any of the strategies. The name of the Strategies do not in any manner indicate their prospects or
return. The investments may not be suited to all categories of investors. Neither Motilal Oswal Asset Management Company Ltd. (MOAMC), nor any person
connected with it, accepts any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their
own professional advice. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory,
compliance, or other reasons that prevent us from doing so. The Portfolio Manager is not responsible for any loss or shortfall resulting from the operation of
the strategy. Recipient shall understand that the aforementioned statements cannot disclose all the risks and characteristics. The recipient is requested to
take into consideration all the risk factors including their financial condition, suitability to risk return, etc. and take professional advice before investing. As
with any investment in securities, the value of the portfolio under management may go up or down depending on the various factors and forces affecting
the capital market. For tax consequences, each investor is advised to consult his / her own professional tax advisor. This document is not for public
distribution and has been furnished solely for information and must not be reproduced or redistributed to any other person. Persons into whose possession
this document may come are required to observe these restrictions. No part of this material may be duplicated in any form and/or redistributed without'
MOAMCs prior written consent. Distribution Restrictions - This material should not be circulated in countries where restrictions exist on soliciting business
from potential clients residing in such countries. Recipients of this material should inform themselves about and observe any such restrictions. Recipients
shall be solely liable for any liability incurred by them in this regard and will indemnify MOAMC for any liability it may incur in this respect. Securities
investments are subject to market risk. Please read on carefully before investing.
Risk Disclosure And Disclaimer
CD
L00
04
6_
40
11
2_
01
0